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Weaker-than-expected nonfarm payrolls sends dollar and oil lower

By Margaret Yang, CMC Markets

The US nonfarm payroll figure in May came in far below the market’s expectations, sending the US dollar to its lowest level against its major counterparts for nearly six months. The US dollar index June contract dived to the 96.7 area, getting closer to its immediate support level of 96.5 (138% Fibonacci extension).

Oil prices slid for a fourth session, as the jobs report complicated the outlook for the US jobs market. The Baker Hughes rig count report also came out on Friday, showing an ongoing increase in oil rig counts from the US, Canada and other international countries. Rising production from North America will counterbalance OPEC and Russia’s production freeze plan. That assumption suppressed crude prices recently, despite OPEC deciding to extend curbing plan for another nine months.

Weaker jobs data failed to dampen investors’ enthusiasm over a June rate hike. The likelihood of a June hike, according to the implied future prices, still stands at 89%. US equity markets soared on Friday to a new, record high, though Bloomberg indicates that investors are pulling out of the market at the fastest pace in nearly two years, according to the latest fund flows.

The London terrorist attack spiked a hunt for safety, sending gold and silver to their highest levels in over six weeks. The Japanese yen also surged to 100.44 against the US dollar, with immediate support and resistance levels at 108.85 and 111.20 respectively.

US Dollar Index June 2017

Margaret Yang Yan, CFA, is a market analyst for CMC Markets Singapore.